Music label EMI signalled a further sharp decline in the popularity of the traditional CD as it said revenues from the format had dropped by nearly a fifth.

The group's recorded music arm, home to stars such as Robbie Williams and Lily Allen, reported a 19.8 per cent revenues drop from CD-based sales in the three months to the end of June, as digital downloading continued to steal market share.

But EMI offered hope that it was beginning to take advantage of the switch to digital as it posted a 26 per cent leap in digital revenues.

CD sales have been falling steadily in recent years as music downloading has taken off.

EMI reported that CD-based sales fell by 12 per cent in the UK and Ireland in the year to March 31 against an industry-wide drop of 8 per cent.

Digital piracy

Music labels have been battling against both digital piracy and the drop in demand for physical formats, hoping to instead capitalise on the boom in downloading by launching online download services.

EMI launched a venture with iTunes in May that offers music to be downloaded without digital locks, known as digital rights management-free products.

The group said today that 'early revenue indications for this initiative are encouraging'.

EMI's music publishing arm is also 'holding up well', according to the group.

Digital revenues for the music publishing division increased by 13.2 per cent while physical sales saw a 11.9 per cent hike.